In the report by Raghu Krishnan and Alnoor Peermohamed, "Bad debts responsible for low credit growth: RBI guv" (June 23), Raghuram Rajan says the banking regulator should not recapitalise public sector banks (PSB) as there is an issue of conflict of interest and transparency.
The RBI governor's stand follows from the position he had taken sometime after the Economic Survey was released. It suggested that as the RBI was heavily capitalised and PSBs were in need of capital, there could be a reallocation of capital. Rajan had contested that view.
The Economic Survey was right, given the situation in India and the fact that Rs 25,000 crore was being considered for recapitalisation of PSBs in this fiscal year. The amount is small compared to the RBI's capital. On June 22, Rajan brought in the conflict of interest and transparency issue. These do not come into the picture, if the original proposal of the Survey is adopted.
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Dr Gurbachan Singh, Gurgaon
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